Oct. 10 (Bloomberg) -- Bristol, Connecticut, home of global
sports television network ESPN, is bucking a nationwide trend of
struggling pension plans with a retirement system that has about
200 percent of the assets needed to meet its obligations.

While communities from Maine to California are struggling
to meet pension promises they made to public workers, Bristol
hasn’t had to contribute to its retirement plan since 2007 and
is now looking to use the $556 million system to foster local
economic development.

“This is the first time I’ve ever seen anything like
this,” said Eric Friedman, a public-finance analyst at Fitch
Ratings in New York. “It’s admirable that they are looking at
creative ways to use the funds.”

States and cities from California to Rhode Island have been
grappling with a pension-funding crisis triggered by investment
losses after the Standard & Poor’s 500 Index sank about 38
percent in 2008, the most since 1937. For many, the fault lies
with lawmakers who for years failed to budget enough to fund
pension benefits promised to public employees.

The median funding ratio for U.S. state retirement plans
fell to about 72 percent for the year through June 2011, from 74
percent the prior period, data compiled by Bloomberg show. More
than 30 states, including New Jersey and Connecticut, had less
than 80 percent of assets needed to meet obligations, leaving
their plans short of the threshold for sustainability.

Manufacturing History

Bristol, a former manufacturing hub of 60,000 residents in
central Connecticut near the state capital of Hartford,
established its funds in the late 1970s, around the same time
ESPN moved its fledgling operations to the city. The company,
majority-owned by Burbank, California-based Walt Disney Co., is
the city’s largest taxpayer and employs around 4,000 people on
its campus.

The city has always made its annually required contribution
while keeping benefits affordable, with no automatic cost-of-living increases for retirees, for instance, according to Thomas
Barnes, Bristol’s treasurer. The plans were aided by deft
investment management, especially in the 1980s and 1990s as
stocks soared, he said.

Its pension funds had assets of about $556 million as of
July 1, 2011, compared with liabilities of $319 million,
according to an actuarial report. Its firefighters’ pension had
a 241 percent funding ratio on that date, the police plan had
192 percent and the fund for city workers 125 percent, the
report showed. The combined ratio was about 200 percent,
according to John Beirne, the city’s investment adviser since
the funds were established.

Forefathers’ ‘Restraint’

“We’re very fortunate because we had forefathers who
exercised restraint and had the ability to understand the
marketplace,” said Arthur Ward, a Democrat elected to his
second term as mayor of Bristol in 2009. “They set the standard
for the rest of us.”

Bond investors have rewarded the city, which is rated AA+,
the second-highest rank from S&P and Fitch, and one step lower
by Moody’s Investors Service. Bristol sold general-obligation
debt in 2011 at yields below similarly rated bonds.

Its debt has also kept pace with a rally in top-rated
securities. Bristol bonds maturing in August 2018 traded in the
past two weeks at a yield spread averaging 0.2 percentage point
above AAA tax-exempts, the same gap as when they were issued in
June 2011, data compiled by Bloomberg show.

Decade’s Gains

The city’s pension investments gained about 6 percent a
year over a decade through 2010, according to Beirne Wealth
Consulting LLC, founded by John Beirne.

The median annual gain for public plans in that period was
4.9 percent, according to the BNY Mellon U.S. Master Trust
Universe, the city’s investment benchmark for the period.

Connecticut boasted returns similar to Bristol, with a 6.6
percent annual gain over 10 years through July 31. Yet the
state’s system has only 55 percent of the assets needed to meet
liabilities, data compiled by Bloomberg show.

“Places like Bristol stand out because they’ve met their
obligations,” said Larry Dorman, a spokesman for Council 4 of
the American Federation of State, County and Municipal Employees
in New Britain, Connecticut.

Above Average

The average funding level for the 185 locally managed
pension plans in Connecticut was about 86 percent, according to
data compiled by the state’s Office of Policy and Management.
The city of Milford, which also uses Beirne Wealth Consulting as
an investment adviser, had 127 percent.

Bristol and Milford were among the first communities to
hire independent investment advisers instead of using more
conservative trust departments at banks to manage their money,
said Beirne, 70. He left Merrill Lynch & Co. this year following
its 2009 acquisition by Bank of America Corp. to start his own
firm.

“It was like heresy in those days,” said Beirne, who is
based in Milford. “Nobody had done it.”

Armed with a surplus, Bristol officials are debating
whether to invest in companies willing to relocate to the city,
which had an unemployment rate of 9.1 percent in August,
compared with 8.1 percent nationally. The pension board is set
to discuss the matter at its meeting next month, said Barnes,
who is also president of the city’s Republican committee.

Worker Cuts

Not that Bristol emerged unscathed from the longest
recession since World War II. The city has cut about 44
positions through attrition since 2008, out of a workforce of
more than 500, and is raising taxes to close a budget deficit,
Mayor Ward said. Also, like other communities, it faces a
funding gap for the health-care benefits it has promised its
workforce.

Some Connecticut communities that are close to being fully
funded are seeking to trim pension benefits as they struggle to
balance budgets, said Dorman, the union official. Similarly,
other communities that failed to make contributions have warned
they may run out of money to meet obligations.

“It’s the political climate that’s allowing that to
happen,” said Dorman.

In trading yesterday in the $3.7 trillion municipal market,
yields on 10-year bonds rated AAA rose about 0.01 percentage
point to 1.66 percent, data compiled by Bloomberg show. The
index touched 1.63 percent July 27, the lowest since at least
January 2009, when data collection began.

Following are pending sales:

CITY & COUNTY OF DENVER plans to issue about $866 million
in airport system revenue bonds as soon as today, according to
data compiled by Bloomberg. The debt will be used to finance
part of Denver International Airport’s capital plan. (Updated
Oct. 10)

MASSACHUSETTS SCHOOL BUILDING AUTHORITY plans to sell $725
million in sales-tax bonds as soon as Oct. 11, Bloomberg data
show. Proceeds will be used to refund debt. (Updated Oct. 10)